Question

Colton Enterprises experienced the following events for Year 1, the first year of operation:

1. Acquired $50,000 cash from the issue of common stock.
2. Paid $13,500 cash in advance for rent. The payment was for the period April 1, Year 1, to March 31, Year 2.
3. Performed services for customers on account for $102,000.
4. Incurred operating expenses on account of $42,500.
5. Collected $78,000 cash from accounts receivable.
6. Paid $36,000 cash for salary expense.
7. Paid $34,000 cash as a partial payment on accounts payable.

Adjusting Entries

8. Made the adjusting entry for the expired rent. (See Event 2.)
9. Recorded $5,400 of accrued salaries at the end of Year 1.

Events for Year 2

1. Paid $5,400 cash for the salaries accrued at the end of the prior accounting period.
2. Performed services for cash of $51,000.
3. Purchased $4,300 of supplies on account.
4. Paid $15,000 cash in advance for rent. The payment was for one year beginning April 1, Year 2.
5. Performed services for customers on account for $118,000.
6. Incurred operating expenses on account of $56,500.
7. Collected $104,000 cash from accounts receivable.
8. Paid $54,000 cash as a partial payment on accounts payable.
9. Paid $33,000 cash for salary expense.
10. Paid a $12,000 cash dividend to stockholders.

Adjusting Entries

11. Made the adjusting entry for the expired rent. (Hint: Part of the rent was paid in Year 1.)
12. Recorded supplies expense. A physical count showed that $650 of supplies were still on hand.

c. Prepare a trial balance for Year 1.

Answer 1

Colton Enterprises
Trial Balance
Year 1
	Debit	Credit
Cash	$44500
Accounts receivable	24000
Prepaid rent	3375
Salaries payable		5400
Accounts payable		8500
Service revenue		102000
Common stock		50000
Operating expenses	42500
Salaries expense	41400
Rent expense	10125
Total	$165900	$165900

Cash= $50000-13500+78000-36000-34000= $44500

Accounts receivable= $102000-78000= $24000

Prepaid rent= $13500-(13500*9/12)= $3375

Accounts payable= $42500-34000= $8500

Salaries expense= $36000+5400= $41400

Rent expense= $13500*9/12= $10125